The Wolf Of All Streets - SEC Drops Stacks Investigation! | Crypto Town Hall

Episode Date: July 12, 2024

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Oh, yeah. We can hear you. You're good. Tested. Let me just try and get everybody up before we get started here. I guess sound test my chat myself. Can you guys hear me? Oh, yeah. Yes, sir. But seemingly, maybe I'm being hyperbolic, but it seems like the SEC just took another L. And we have a couple guests here to talk about it, who were directly involved and excited that it's going to be a topic of conversation today. Just wanted to wait until we get a few more people in to talk about it more thoroughly. I guess first we can talk about the market and its absolute boringness. Before we dive into that, I think just checking now, Bitcoin just totally sideways, right? Trading $57,800, kind of been trading in this mid to high 50s for the last few days.

Pretty interesting that the summer part of the cycle is so strong you know the the boring doldrums of the post-having summer that's with all of these tailwinds we're not really seeing price move massively and for those who believe in correlation the fact that we've seen all-time high after all-time high after all-time high and stops also not moving the market uh dramatically just shows how powerful this part of the cycle somewhat is yeah carlo go ahead first off long time no talk feels like the last few times we've tried to do this we've had so many technical issues so i'm glad we're all online today one issue that i'm looking at that's fascinating that I don't think is getting a lot of attention is this hearing that's about to go down on January 15th, the Coinbase SEC case. Coinbase wants access to Gary Gensler's private communications, which I think is a fascinating

issue. They're trying to make a case that his communications, both when he was a professor, when he was chair of the CFTC, and even through his tenure as SEC chair may prove relevant to their lawsuit. The judge is pushed back, but she is willing to keep an open mind and hear this. If those communications do by some miracle get released, it could make for some interesting revelations. I was talking about the fact that Gary Gensler multiple times publicly said that certain things were securities that he's now under official capacity saying is not the case and had comments about exchanges that are if you recall, anytime he testifies before Congress, he always refuses to give any personal views or thoughts on pending cases. So it would be interesting if there actually were personal

views and thoughts on pending investigations and cases in his private communications with, let's say, legislators. So I had this similar issue come up once in a case, very sensitive information. My client was adamant that the judge did not sign his search warrant prior to them executing it at his house. And I had to subpoena federal judges' phone records. So this can be done. And the judge can decide to look at these materials in camera without the parties present and decide whether there's anything relevant in those materials. So this is not unprecedented. It can be done. But the SEC is pushing back that this is really irrelevant.

When we get the bombshell, we might find... Yeah, I was gonna say we might find a conversation with Gary Gensler, with SBF. Go ahead, Zach. I was gonna say conversations with the White House or with Elizabeth Warren about political motivations for SEC enforcement. Bingo. That would be a tremendous revelation. All right. Well, I think we're gathering the folks here. So I want to talk with, and we'll change the title once I stop talking. I want to speak more directly with Alex and Preston here. Maybe you guys that maybe Alex, you can tell us

what the breaking news is that just came out 20 minutes ago. And then we can dig into the details of it. Yeah, I mean, so my company, Hero that I run, CEO of Hero Systems, we're a dev tools company for Bitcoin. But for the last three plus years, we have been dealing with an inquiry from our friends at the SEC and trying to work with them just to talk about how the Stacks ecosystem, how the Stacks blockchain works, what our role in it is. And earlier this week, we got a notice of a termination letter from them that they are closing out their investigation with no recommended enforcement action. So just a nice relieving day for me today. Three years, right? Yep. Like June of 2021 is when it all kicked off,

basically shortly after the Stacks mainnet launch earlier in 2021. It seems we've seen a few of these investigations closing, I'm sure having nothing to do with political fear of going against crypto after pushing too hard. I just couldn't possibly make it do it that. But obviously the Paxos, the usd similar situation this week right yeah i don't know the i mean i only know obviously about the paxos case what i saw there and like obviously paxos was a stable

coin um you know the stacks is a entire you know decentralized ecosystem that does have a token attached to it too so So like, you know, I think one of the funny things about dealing with this is we still don't know why they do any of the things they do or how they make any of the decisions that they make on it. You know, they don't give you really any insight into their reasoning. You're just left to kind of make your best guesses on it. And so sort of all we know is we got really good

news on this and we're happy it's amazing man very happy for you guys i mean preston i'm assuming you have some color on this i mean nothing nothing dramatic i mean alex and i are buddies you know so when i'm sitting there doing my nails in the bathtub sometimes i'll pick up the phone and give him a call and he'll we'll just bitch about the SEC together. But I mean, on this, it's, it's, this is, lawyers are very ego driven creatures, mostly, right? There's some, there's some that some lawyers who don't have an ego. One of them is Steven Pally, who's achieved nirvana. But for those of you who know him, but the rest of us are ego driven creatures and we don't like to lose. So the SEC in particular, I don't think they like to lose because when they lose, it affects their ability to bring future enforcement actions as a political matter.

And so what's happened was this is a sort of continuation of a multi-year story, which started when the SEC brought its lawsuit against Ripple Labs back in 2021 and said, your primary sales of XRP tokens to investors, those are securities transactions. Moreover, your secondary sales of those things out on the marketplace, those are also securities transactions. Now, Ripple lost a key part, or Ripple won, excuse me, a key part of their case against the SEC relating to secondary sales last year. That was widely viewed as an aberration in the Southern District of New York with Judge Torres. Judge Raghoff then in the Terraluna case declined to adopt the same reasoning in relation to Terraluna. And then what we had was about a week and a half ago in the binance case in the uh in the district of columbia the ddc um the secondary binance one on the secondary sales question now how this is relevant for hero systems is that hero is you know formerly block stack pbc now hero pbc um hero is one of the

few companies that when the sec said come in and register they were like okay and they did right so what they did is they went, I mean, not formally, they didn't file an S1, they didn't do an IPO, they didn't try to list their token. But what they did is they did a Reg A offering of token units. And they went through the SEC approval process. They had all the documents, they did all the disclosures, they listed the RTUs, and then the RTUs became unlocked. And then people started trading the tokens and those wound up on various cryptocurrency exchanges. So I'm not sure what the SEC's theory was here, right? They never sent

out a Wells notice, they never brought a lawsuit in this case, I wasn't advising, you know, form, I wasn't advising hero systems on this as their counsel, you know, it's just Alex is a buddy of mine. So sometimes we talk shit about, you you know various things that are going on in the space in order to trade intelligence but this is one of those weird cases where the if I'm looking at it there's no primary violation of section 5 of the Securities Act of 1933 because the issuance the initial issuance of the tokens out into the market via the regulation a offering was compliant, which means the only thing the SEC had left was that potentially secondary sales or some other type of reporting or some technical

violation relating to what's going on in the secondary market is what they were going to hang their hat on. The issue, of course, is that they've just lost two secondary sales, big secondary sales points in big cases. And so I think from their point of view, this case has, you know, this investigation has moved from a potential winner into a potential loser, right? And actually, I would say a likely loser. So that's my view from 30,000 feet. It's that the SEC kind of didn't plead sufficiently that in the Binance case that the secondary sales or the underlying asset was a security inherently, right? They screwed up, they're retreating a bit rather than being more aggressive. Because if they keep bringing these things and losing them, it doesn't look good for the agency.

So that's, and it's really, I mean, I wouldn't say it's that there I've seen some people saying, oh, this is a defeat for the SEC. This news, it's not a defeat for the SEC. The SEC, you know, the SEC didn't lose anything here. But what they did is they handed us a win. And that's that's something we should be proud of. I think this might be. Come on, Preston. It's an L. It's an L.

I don't care. It's my take. It's an L. You say whatever you want. The legal advice they lost because we are. I think we all know that in a different political environment than currently, at least speculate. We can speculate if this had been six months ago instead of now. I bet I would say the outcome would be different. Yeah, if Biden were up by 10, right, and he were slated for his second term as the God Emperor of the United States, again, maybe this would be different.

But as things currently look, I think there's probably going to be a change of leadership unless something dramatic changes in the election race in six months. The SEC is going to have a very big change of personnel in about six months' time. And not only that, we're going to potentially have market structure legislation, which means that even some cases where you do have violations now where the SEC is winning on certain points, that activity might be legalized. When the SEC's position vis-a-vis the crypto space is essentially, currently, that all cryptocurrency exchange activity within the borders of the United States for anything other than Bitcoin, and possibly ETH, but they won't confirm that,

anything other than those things, that's unlawful. And so I think that's obviously not long-term. It's a sustainable strategy in the long term, either for the industry or for the government. And so I suspect we're going to see some changes next year, which wind up mooting a lot of the cases that they brought. I say now, I say it's now. Go ahead, Zach. I would just say I'm cautious against too much optimism here. I mean, I think what Preston just said is right, but there are definitely ongoing SEC investigations, including against major players and their subpoenas and their stuff that's not being made public. And so I think what we might be seeing is a bit of a shift in priorities of the SEC.

I don't think that this is them standing down for political reasons. I would love for that to be the case. I just don't think that's where we are. I'll say it's now. Muneeb, you're here. What's up, man? Good to see you. Hey, everyone. How's it going? Well, I know you were listening and you found it stacked, so I'm sure you have some thoughts. Yeah, I think it's a great day, of course, and also because the information is public, so we can chat more about it. But I would just say that, you know, as a project, we effectively always tried going above and beyond to try and comply with US regulations.

If you remember back in the day in 2019, when the SEC first qualified the offering, I do think it came across as like there's some glimmer of hope. Everyone was sort of excited that, okay, fine, maybe it took a while, a couple of years to figure out a regulated path forward, but now we are getting there, right? And I think after that, there was sort of like a very long time period in which there was confusion again. I think once our reg A was sort of qualified, it would have been very logical to come up with a decentralization framework, which our lawyers, Wilson and Sonsini, actually publicly posted. They're like, hey, here's a decentralization framework that this project is going to follow.

And I think it could have been very easy to sort of have that clear framework for here's how you do a qualified offering. Here's a decentralization framework that you can follow. But instead of that, we got years and and years of sort of like silence and questions and investigations and this and that. But I think this letter is actually very hopeful again, like in my view, that, you know, they looked at all the information and sort of said, you know, we're not recommending any action.

Love it. Fred? Yeah. Good morning, everyone. I'll give you some positivity, Scott. I got my case against SEC next week, and I'm going to kick their ass. So I'm excited for that. And I hope everybody listens in. And I just wanted to say that it's interesting, because I think you had the Bloomberg boys on either last week or maybe earlier this week. And they they said we think etfs launching uh live on eath

for uh i think they said july 18th and that morning is when we're doing the hearing in front of the ninth circuit so and i'll post that because those are all live streams so uh hopefully i just back up all the trash talk i just said but you know i I say that because I think what Preston was saying, and I'm sorry, I lost track, but the, you know, the SEC is just shifting their priorities. They're moving around. There's a lot of things that are, they're still attacking that we don't know about or the public at large doesn't know about. And so they're going, I mean, it's definitely a win, as you said, that they're dropping, they're losing cases like, you know, the stable coin issue. I mean, that's obviously huge. But they're just moving around shifting priorities, you know,

they're still fighting consensus, they're still battling other other cases, you know, with their arguments. So you take the wins where you get them and you keep pressing. Yeah, I mean, I'm still rather convinced that this has happened six to nine months ago in a different political environment that they would not be compelled to drop these. So maybe that's my incorrect opinion, but it seems like it's become politically very unpopular to attack the industry. And so any, I would say case that's on the fringe, they're probably not going to pursue that they would have pursued before. I mean, if we look at back a year when they were attacking Binance and Coinbase,

there were no court wins effectively for the industry, right? So it's a completely different environment, I would say. But I mean, I think we have a lot of staff fans here. So seeing you in the clear, really, really helpful. I mean, I have to imagine, can any of you give us some color on what the process, not necessarily the costs, but the process, and if you are willing to share costs, of a three-year investigation from the SEC looks like? I mean, like Alex, how much of your time did that take? How many lawyers were involved? You know, what kind of documents did you need to give? Or is that? Yeah, I don't know how much I can say. What I'll say is, you know, there's multiple when you're dealing with this kind of situation. I'll just say like, one of the interesting things is,

you only ever like pay other people to talk to the SEC for you. And you're always ever like set just trying to read the tea leaves. So I'll just say it's, it's incredibly time intensive. It's incredibly focused, just a lot of time in the room with your lawyers, you know, talking about it, trying to figure out like, Hey, how do we actually fulfill what they're trying to ask us for? Because, you know, as we said we said like was always to be um as compliant as possible and to like be as collaborative as possible and how we're working so uh i'll just leave it as it's incredibly incredibly intensive and i think this is part

of the reason we've also been saying for a while like we need an actual regulatory framework it works for this because i think in the same way that people have complained about Sarbox and how it's stopped smaller companies from being able to go public, there's no way that most people could make whatever existing framework there is work. This is something better. Alex, I think is probably not in a great position because you don't want to reveal the specific sausage about exactly what happened over the course of an investigation. These investigations are intensive, and specifically, they're invasive. So you have to preserve all documents.

You have to preserve all communications. You have to go through employee communications, SEC investigative subpoenas. So it starts out with a voluntary information request. And then what happens is it becomes something called the matter under inquiry, which is when the commission has said, okay, go ahead, you can investigate that, after which time they get subpoena power. And SEC investigative subpoenas are incredibly invasive. So I, you know, I wouldn't be surprised if what you're looking at here is in the many millions of dollars. I've had individual clients who've received SEC investigative subpoenas, and they've spent half a million dollars or more attempting to deal with it, and that's on relatively small things. This is an example of lawyers have an expression for this, the process is the punishment, right? Just getting the attention of the leviathan and having it, you know, butt into your affairs is a punishment in

and of itself, even if you haven't done anything wrong. So in this case, I would say the company has been probably punished sufficiently. If in the view of whoever decided to start this investigation at the SEC, that they don't need to take it further. And the company has been punished, make no mistake about it, even though it's not a judicial punishment, even though it's not a finding or anything like that. Being the target of a government investigation is very unpleasant and very expensive. Manip?

Yeah, maybe I can add a little bit here because Preston is right. Like, you know, addicts can't comment that much about it. But a very similar experience that I had was when we were doing the SEC qualified offering in the first place. Like, I'm a computer scientist. Like, I'm here to build stuff and, you know, build our protocol. And that entire year, I think I was doing more legal work than anything else. And even to the point that our law firm was joking by the end of it, when we got the qualification, they're like, you should get an honorary law degree at this point. I think it was kind of funny, but it's also like, this is not what we're here to do. We're actually here to

build. And that is something that we were doing ourselves, right? Hey, we want to go and file this with the SEC. We want to get the qualification. When is the inverse of that? When they're sort of like, you know, open investigation, I think it's just more sort of like, you know, distracting and takes a lot of time away from you. So kudos to you, Alex, that, you know, whatever you've done without disclosing too much, that you were able to come out clean on the other side.

Yeah. Does this mean moving forward that, Alex, that pretty much you can continue to build and put your lawyer hat in the drawer and call it a day? Yeah. I mean, it's not going to change anything. I think about how we approach our business. As I said, we're a developer tools company for Bitcoin and for Bitcoin layers like Stack. So that's what our focus is on. We're not going to materially change what we do because we've always been operating the company in the way that we thought was the best way to do it. But I will definitely just have a little less stress in my life and have to spend a few less hours on the phone with outside counsel every month, I think. Yeah, we all love talking to lawyers all day.

That's why we do Twitter spaces. How many do we have here? We have Preston, Carla, lawyers, Fred, we got four on stage right now. I would say that that's probably our quota. Honestly, I would say that's average. So wait until you get the bill, Scott. I just say very expensive show to run. To be honest, I try to keep them very short. The bills are pretty bad.

Like this is the thing that I think Preston was mentioning that we were fortunate that we raised enough capital. So it could actually go, go to things, but this would just instantly kill any small startup. You're done. That was my real question. Right.

Right. So, so on one side, we know that nobody really like very few small companies, small businesses even have the resources to like get registered or the time. Right. Which is because of the sort of red tape that you described. But then if you even have to answer for yourself

and you're not in the wrong, it's going to cost you so much that you can't even do business. So you're one of the rare ones that could even probably deal with this. Most would never be able to. They would just go out of business, right? Library is a prime example of that.

Library was a small startup out of Manchester, New Hampshire, run by a guy named Jeremy Kaufman, who's extremely controversial on Twitter. But it was an interesting application. Basically, they had a video app like Rumble or YouTube. And the monetization mechanism was – and also the – I believe it was content like they had, it was content addressable, like with BitTorrent. And you could also do monetization on their blockchain. So this is one of those really rare examples where someone actually built a blockchain application, which serves a real practical purpose. And would be a utility token, right? Under the industry definition of the term, even though there's no legal definition of the term.

And I'm not sure what happened. I think part of it might be political. And I think part of it might've been that the Boston SEC office was bored and there was only one blockchain startup within their catchment area and that was library. So they went after library. Library was bankrupted by this. Basically they fought it until they ran out of money and then they just declared bankruptcy or I don't know if they declared bankruptcy or if they're just selling all their assets, but they were done. So it's and that was a company with a business, they'd raised a bunch of capital, but they didn't raise enough. So the SEC can absolutely kill a company with one of these investigations. And they have done so before, and you know, they will do so again. Yeah, I think in many cases, that's their intention, right?

Is that they know who can and can't fight. And I think that's been kind of the story of the last year is that the crypto industry had a deep war chest and was willing to go on the offensive. And maybe that was unexpected and that we would take some wins. Go ahead, John. I just have a question. Maybe this is an attorney question or not, but at what, and actually the question for the whole crypto industry is that at what point do projects and teams pull a Satoshi and just never let anybody know who started it up their their project their their their ecosystem their network i mean at at what point does everybody just say hell if the regulators if the sec knows who the team is who makes it up

just don't just don't say anything just keep they will find they'll find you i mean it's not if they'll find you because if so what satoshi did is he kind of let the thing lose he chatted a bit on the forums and then he disappeared disappeared. But I think in the in the current paradigm, where there are expectations around listings, or their expectations around marketing, or their expectations around community development, it is really very difficult for someone to conceal their identity. And you know, again, I can't there, there are details I can't go into, but there are projects where people have thought they were being very clever and anonymous, but they have been unmasked because their OPSEC was imperfect. So certainly, if you think you have perfect OPSEC and that you can run around, have a GitHub account, run a Discord, be on Twitter, do all those things and have nobody find out who you are. Good luck to you. But I think that the likelihood is that their subpoena power would be able, and they'll be able to find you.

Carlo, go ahead. Yeah, the difficulty too is that a lot of these token protocols want to insulate themselves from liability. So they want corporations. They base them in Delaware. And in their filings, they've got to identify who the key principles are in those corporations. So it would be challenging to remain anonymous and then insulate yourself from potential litigation in the future because it is pretty easy to unravel on the internet the identity of individuals it's been proven time and time again so that is probably not a uh i would say a good uh strategy to adopt because i think it would ultimately backfire terribly not sure if carla was down we lost him go ahead lawyer

yeah i mean this is really the question that i deal with all the time right but i do think that there are some lessons here for new entrepreneurs like for example um when starting projects like you could focus more on like a broad decentralized community from from day one like you know have you, a lot of like open source developers all over the world who are coming in, chipping in, contributing to the protocol, versus going from a more structured, like, here's a company, and this company is sort of like, you know, hiring all the people and doing this, I think there's some lessons that can be drawn, in terms of pushing more towards decentralization from the beginning, instead of sort of like, you know, starting off as a as a company, and then hoping that you could like decentralize over time,

like that's, that's something that he stands out to me. Lawyer, sorry, I'm not sure. And sometimes people can't hear each other. Go ahead, lawyer. Yeah, no worries. So what I was saying is, you know, this is the question I get all the time, whether it's from Americans or non Americans, you know, we talk about, okay, well, here's what anonymous looks like. Well, let's not do that because you cannot stay anonymous forever and you don't need to, right? Unless your goal is to defraud people or like rug a project, then the only issue is having this touch America. But it seems obvious that there are, there are countries out there that actually have, you know, not, they don't have regulators who are, or at least let's say they do have regulators who maybe at least consider the fact that, you know, they're destroying a business when they take an action or something like that.

They have good faith regulators. They actually have mandates to grow businesses that are coming. So it's just not, what I'd love to hear from the other guys is like, what's the steel man of why even do it in America? To me, it seems like opening a coffee shop and like one of those untouched native villages where they'll where they'll shoot you with bows and arrows. I just don't get it. Yeah, I mean, the idea that even you but don't you give credit to the people who do try to do it the right way in the United States then? Yeah, so that's where I come down. I think it's patriotism is the end, right? Or like, I mean, access to capital. But at this point, you can have a lot of capital elsewhere. And it's just such a treacherous road that I think it must be either patriotism or a view that there's just much more capital in America. But by the way, we also have seen that being outside the United States does not make you out of the purview of the SEC, according to Gary Gensler. Yeah, I mean, at least you're, you're at least maybe in someone else's purview, and you don't even need to, you know, the money, like, it doesn't need to touch you. Like to the comment of Satoshi, like, if you were going to play that game then you can never get the money right the only reason that you need to be involved as the founder is aside from being a

contractor of this business that you've set up properly is um you know where's the money coming and how do you justify that to the people that you've actually explained the project to but if it's profits that are coming into a company in a country that's supporting what you're doing, and you're in America, it's not necessarily problematic, to your point, unless there's some sort of God-king American regulator. Interestingly, Hester Peirce, who is an SEC commissioner, and could at least be the interim commissioner if there's regime change, depending on who gets the job afterwards. I mean, she's been proposing for years Safe Harbor, which, interestingly, I think Muneeb and Alex, you know, with the three-year sort of process that you went through, her proposal, I believe, for Safe Harbor was that you let companies come in and register simply, and they have three years based on some

process that's defined to prove that they're sufficiently decentralized to not be a security in the United States. As an SEC commissioner, she's been saying this for years. Of course, that would undermine Gary Gensler, and they would have to actually define what decentralization looks like. But we have rational people at the SEC that have been proposing ideas around this for a long time. I mean, Dave, you and I talk about this, have talked about this many times, but it's not that hard. Yeah, I mean, it's, and it's important, because while the FIT Act, FIT 21 is flawed, it incorporates that safe harbor. And the idea that, you know, I think I can't remember, I think it was James Murphy, otherwise, a metal, you know, metal law man basically made a great point that the rule of law assumes that people can't be prosecuted

unless the law that they're accused of violating is clear and understandable. And the bottom line is, is in crypto, that has not been the case. But the thing that's interesting about all of this, listening to this, and you say it's taking an L, honestly, they're not taking an L until the SEC is, some of their power is restructured and some accountability is restored. Effectively, they destroyed Paxos' stablecoin business, and they have no accountability for it. Paxos has no recourse, and that is a big problem. Most of what the SEC has done has actually not been the stuff that we've talked about, like really bad things that they have done. So let's talk about a bad thing that they have done that no one talks about they have shadow banned or effectively banned any firm who's a broker dealer from being able to trade crypto spot so my firm for example

in our first funding round back in 2020 2021 our plan was to become an introducing broker because we have the best system for trading crypto on exchanges we want to be an interesting broker because we have the best system for trading crypto on exchanges. We want to be an introducing broker. Register with FINRA. I've done it three times before. I know. I talked to the president of FINRA. I know the process. They have not allowed one broker dealer, not a single one to trade spot crypto, even if it were only limited to Bitcoin or joke, joke, Ethereum, but non-securities. They haven't even allowed that. And they haven't done it via a law or a rule filing, so there's no public comment.

There's no Administrative Procedures Act involved. SAB 121, we all know about that now. Once again, not subject to the Administrative Procedure Act. It was a freaking staff guidance on accounting, but they're well aware of the fact that major firms won't violate said guidance, even though it doesn't have force of law, because they know that they'll get enforced it. And when you have an enforcement action against you, as the speakers in the panel know extremely well, it's very, very costly to defend, even if you're going to ultimately win. I mean, I can't tell you how many times when I was at Citigroup, for example, we settled cases that we knew we were right on. We knew we didn't violate

anything, but it would have cost more to defend the case than it would have to settle. So that's why you see so many settlements throughout. If you go on FINRA broker check, you'll see lots and lots of settlements and you'll see lots and lots of things because the SEC has a lot of power. The other shadow power they have, and I'm very well aware of this as well is we've been told by many i mean many uh firms that they can't invest or work with a firm in the crypto world because they're afraid of being targeted uh by the sec because they have so much discretion to bring enforcement actions that while they may seem like nuisances, that effectively, it could be very, very costly. And so, you know, until that

has changed, until there's some standard that they have to follow and some accountability, you're not going to get, you know... Isn't Chevron a step in that direction? Oh, it's definitely a step in the right direction, but it still costs a lot of money to defend. The point is, is Warren Davidson put out a bill that has never really gotten the light of day. But if you really want to do something, I think the biggest issue in this election is will a Trump administration follow what Vivek and others have been telling him to do and what he's been talking about now and really take a hatchet to the administrative state. And when taking a hatchet means, it means creating accountability. It means ending the raw power that goes on behind the scenes of these three-letter agencies, because most people don't understand just how much power they have. So while the courts are certainly pushing in the right direction, because, you know, it's not remotely constitutional, you could argue that pretty much everything I said violates

illegal search and seizure, because that's basically what they're doing. And in many cases, free speech, etc, etc, doesn't matter until you can actually get a handle on it. And so yes, these are all really good things. But this is not the time to take the foot off the accelerator if you're the industry. Yeah, I think this is the time to go even harder, right? And I think that that's kind of what we're seeing, obviously, which is good news. And in the context of all this, I think it's interesting to note that the CFTC chairman, Benham, I believe it was yesterday in a court case in Illinois, he said very clearly that Bitcoin and Ethereum are commodities under commodities law, and then went on to say 70 to 80% of crypto are commodities, and not security. So listen, we know that this is the jockeying of power between the CFTC and SEC for regulatory

control or regulatory purview of our industry. But that is a pretty bold statement from effectively Gensler's counterpart at the CFTC. I mean, did anybody see that or have thoughts on that? I thought that I know it doesn't mean that they are commodities by any stretch, but him putting that out there publicly in a court case is pretty Bitcoin and Ethereum as commodities. That was in front of the Senate Ag Committee, I believe, right? And he was very direct about it. He didn't really kind of fool around, tiptoe around it. It was a very direct matter-of-fact statement that he made saying

that 70-80% of the tokens are not securities. It was a pretty big deal. I'm surprised it actually didn't pick up more traction in the crypto news sites. Does anyone else have a thought on that? I think that it's, once again, you know, you need to be balanced about that. I mean, the CFTC has regulated derivative markets and that's what they've done, which are professional markets. We have no idea what the CFTC will do when they're given statutory authority to regulate

spot electronic markets. We don't know. And to assume that they'll be laissez-faire is a bad assumption, much more likely, because if you look, actually, the derivative market structure is more gatekeeping, more gatekept than the equity markets are, if you can believe that. I mean, but it's a fact. And so, you know, I find it amusing how the industry says, oh, well, the CFTC would be so much better. I mean, the truth of the matter is, anything that has clarity will be better. But do not assume that there is a clear path for distributed finance under a CFTC regulated regime, particularly if they're Democrat appointees, given the power that is here. But there's nuance there.

It's important. It's not to say that the CFTC isn't better because they are. But then again, I mean, you could pick five random people off the street and they'll be better than this SEC commission. You know, we have Gensler and then we have Carolyn Crenshaw who's up for re-nomination despite writing arguably the worst, and I mean worst dissent I have ever read, ever. And I, on our CoinRoutes blog, and I posted this many times on X, took it apart piece by piece.

I mean, she made so many stupid factual statements, disputed court cases. I mean, honestly, forget college. A high school economics paper, she would have failed. You know, and this is someone we're putting up for the, to be renewed at the SEC, who is hyper-partisan. So, you know, if that is what's going to be the leadership in four years, and don't dismiss this because this election is not done yet. There's a big problem. And so the industry really does need to focus on this. And yeah, we always have a short sighted view as to what's better or worse. And it's what's better or worse by our perception now. And you have no idea what either of those

regulatory authorities will look like in two years, four years or 10 years. Right. Exactly. Right. Yeah, you made the best point, which is like this SEC is terrible, but there were plenty of times where people cheered the SEC as this great regulator who did amazing things. So we can't really predict what these regulatory authorities will look like at all in the future. That said, I think right now, if you're looking at clear and present danger or the situation the industry has been in, regardless of who is going to regulate the market, having most of these in some way, which is not happening now, but officially deemed commodities rather than securities, I think most people would view as a win. Yeah, it would. I think also most people,

if you ask them, do they think that is it problematic that a that the no U.S. citizen can touch a derivative exchange on any crypto assets outside of the CME, which requires you to. I mean, if you understand the cost structure of trading futures versus trading perpetual swaps, that this product, which is very popular in the rest of the world for lots and lots of very valid reasons, is inaccessible and will be inaccessible under any legislation we've seen passed. I mean, one should consider what this really means. I mean, that's the next front, admittedly. And I understand that we're fighting the wars that we have to fight. But understand what you really want. You really want unfettered access and the ability for people to make adult decisions on their own and not have a nanny state. but he's not wrong. And it is worth understanding that the simple fact is the average American who wants to play leverage in financial products uses the options to get that leverage. And it is at least 80% of that premium that is bought for buying leverage loses money. Whereas in perpetual swaps, we talk about liquidations, but it's zero sum. There are

winners and there are losers. It is a much more efficient way to get leverage. Yet America is shut out from that market and shut out from that product. And until that's changed, I'm not going to, I wouldn't say we have any reason to keep the pressure down. Yeah, I think everyone agrees. I think there's the fact that we've made tremendous progress, and we can't argue that. I think the last year has probably blown most people spot ETF, because there was very little reason to believe a year and a half ago that the SEC was going to approve either. Certainly not the Ethereum spot ETF. Juan's here from Bitwise. I spoke with Balchunas and James a couple days ago on YouTube. They kind of had adjusted to a very, very loose guess. They're not giving high odds that we would see Ethereum Spot ETF

potentially trading July 18th, which is six days from now. How are you guys planning for this right now? Yeah, well, as you know, I can't give too many details because we're still under the scrutiny and haven't launched yet. But what I can say is we have been on a plan to be ready for launch as of beginning of July. When we were

going back in June to the back and forth with the SEC, and we weren't sure how long they were going to take in giving comments back and how many rounds of long they were going to take in giving comments back and how many rounds of comments they were going to give. So back in June when they first approved the 19b4s, we thought it could be as early as end of June that they could launch. And so we've been getting – or right beginning of July. So we've been getting ready for that since then. And so where all systems go,

and at this point, we just received the last comments back from them. And it looks like now it's just up to them, maybe one more round, or maybe they'll just say, it's time to follow the accelerated request to launch. And then that's the last thing before you go. So we're just sitting tight and waiting. We've got, you know, all our materials approved and all the things we need

from prospectus and from a regulatory point of view, ready to go and just waiting for them to give the green light. Now they're under no obligation, even after they, you know, we go through the last round of comments and they don't, and they say, you know, we're, that's, that's enough. They're under no timeline obligation to, to approve at any point. So if it's next week, that's great. We're very excited. It could be longer than that. And you know, we're just, we're just waiting, waiting to push as hard as we can when, when we go at the gate. Well, I love that you guys were the first to jump ahead with the sort of advertising and marketing campaigns, right? And obviously not specifically for your

product. I know you can't do that before Ethereum in general because it's a favorite to everyone. Yeah, well, I hope people have gotten a good laugh out of them. We try to infuse some good humor into them and we're happy with the response from the industry. Does anyone else have a particular expectation or any inside baseball on what's likely to come with the Ethereum spot ETFs? I mean, we can conjecture all day, I guess, to an approval date, doesn't really matter, or to how successful they will be. But I think we've also talked about that. I mean, generally, does anybody on the panel have a strong feeling that these are going to be more successful than we anticipate? I mean, one, obviously,

we can talk about more. Matt said $15 billion in 18 months, which would effectively put Ethereum in 18 months where Bitcoin spot ETFs went in six months, right? So roughly around there. Yeah, that's right. Yeah, that's right. And we made that conjecture based on what we've seen, A, on the split just market cap cap wise between Bitcoin and Ethereum, but also on what we've seen be the inflows into spot products, spot ETF products in other jurisdictions

like Europe and Canada, where both Bitcoin and Ethereum spot ETFs have been out for a while. And so we're very optimistic. I mean, 15 billion in 18 months would still put Ethereum ETFs as one of the fastest growing ETFs of all time. So that would be we think would be really great. You know, market has been a little lower expectations on what could happen. But we think the uptake will will be strong. We do think it'll be different initially between Bitcoin and Ethereum and who invests in them. At the outset of the Bitcoin ETFs, we saw in the first 13F filing season that it was very strong uptake from hedge funds, from some RIAs, and from retail.

We think because the institutional crowd understands Ethereum less than Bitcoin at this point, we think retail will be the main driver in the first couple of months of the Ethereum ETFs. But we've been having conversations with institutional investors about Ethereum and about differentiating between Ethereum and Bitcoin over the last, certainly this year and over the last year. And people are starting to understand that difference and understand that these two assets can work differently in their portfolios and can fit different places in their portfolios. And so people are starting to get excited in the institutional crowd as well. Dave, then Carlo. Yeah, I think that the most important point here from markets is it's always relative to expectations. People always forget that.

The Bitcoin ETF, we saw just even in the summer, you know, long before it got done, you know, we saw 25% rallies, right? You know, there was a rally when the surprise of the Ethereum ETF, but it faded pretty quickly. The Bitcoin Ether ratio has been languishing. It can literally move 10% and still not be towards the short-term high that happened when it first got announced. I think that the expectations for it are lower, much lower than the expectations for the Bitcoin ETF, in which case I think that the dynamic of the big rally and sell the news on IPO day is less likely. It just is. I mean, it feels like it is set up to be different. Now, understanding the same dynamic is true. You don't expect day one to be the low.

Generally, there's a pop on the actual release, and then it stabilizes and then starts moving higher when it's one of those like this. But I think that is a more likely scenario. I also think that, and this is something I'd love to hear Juan's comments on, but it feels like the reason it's going to be more retail is because the story resonates, the story of a tech platform that you're in relatively early in the world computer is easier to explain to retail

who doesn't give a crap about Austrian economics or monetary policy or digital gold or any of that stuff that's in monetary policy. I know how many people's eyes glaze over when I start talking about it, regardless of how passionate I am. But if you start talking about a tech platform that could revolutionize finance and revolutionize art and revolutionize real estate, all of a sudden people say, oh, okay, I get that. That makes sense. So I think it's going to play out from a trading perspective different than the Bitcoin ETF did and with a more positive bias post-launch than the Bitcoin ETF did, which sort of peaked and then settled back down before it rallied again.

I think one need to see what what ETH does is their fees. But even there, Grayscale, that's an important point. So I own ETH because I wanted to have Ether in one of my brokerage accounts, right? ETH has the discount left. In fact, there have been a few days where it's traded at a premium. So the sell pressure, it will depend on how much they increase their fees versus the closed end fund, right? So I don't know that selling pressure is nearly as big as it was in GBTC, where in GBTC, it traded at this huge discount

and it never got to the point where ETH has been at for as long as ETH has been at. So I think that it is different there. Carlo. Dave. Yeah. No, no worries. Dave, yeah, just going back to your point. The positioning of Ethereum as a tech platform is actually what's gaining really good traction with institutional investors for them to understand that Ethereum is different from Bitcoin and, you know, positioning Bitcoin as a monetary

store of value, while Ethereum as a tech platform. So I think it's initially, regardless, easier for retail investors. But for institutional investors, this is what is helping them understand it as well. And there's actually more, you know, of your RAs, more of your money managers that have exposure to tech than they do to alternative assets like gold. So this is for positioning and helping them understand that it can fit into their tech sleeve and their portfolios is actually what's getting them excited. Nonetheless, institutional investors are still behind the curve in understanding crypto assets. And so, you know, they come into it as like, oh, Bitcoin,

Ethereum, they must be the same thing. And then getting them through that hump takes a little bit of education and time. But once they once they start realizing the different characteristics, institution, institutional investors get very excited. So that's why we think retail will lead with uh investing in the in the ethereum etfs but then uh everyone else will come up behind them and i think to your point dave of the difference uh in expectations i think that that will make a difference in the trading also uh i think something that people have overlooked is that Ethereum has, you know, it's lower liquidity than Bitcoin is and about 30 percent of the supply is staked. So I think if these ETFs, if the inflows start coming in and, you know, the hundreds of millions and billions, that'll really make a big dent and move the market in a bigger way than it

did for Bitcoin. I just want to follow up to one point on liquidity. The difference is not nearly as much as you think. It's definitely smaller, but the cost of trading Ethereum is extremely comparable, at least in our clients. It's extremely comparable done well vis-a-vis the cost of trading in Bitcoin, for whatever reason, I can give you data if you cared. Yeah, I was just gonna say to one point, something I never thought about. It's really interesting is that when you look at the way that RIAs handle people's money, obviously,

they've always recommended a 6040 portfolio, and they never allocate to gold or alternative assets. So I didn't even think about the fact that digital gold is a tough sell because they don't even allow one, two, 3% for that, right? It's always stocks and bonds, basically, a formula that is safe. So that really is a compelling difference for how they'll be able to pitch this. I hadn't thought about that. It's really interesting. Carla, go ahead. Yeah, you know, one interesting factor is the timing versus the economic conditions. When Bitcoin ETF dropped, we had a high inflation high rate scenario, a lot of uncertainty

in the market. Now we are seeing improved at least data. I mean, the grocery store bill is still outrageous, but we're seeing improved data on inflation. And we're seeing a higher likelihood of rate cuts, those will probably translate into a bigger appetite for risk assets and risk assets may actually rip in response to that. So the ETH ETF might actually benefit from that if we do see a couple of rate cuts coming before the election. Yeah, it's going to be very, very, very interesting to see what happens there. Anyone else has any deep thoughts on what's likely to happen here? Yeah, Jonathan.

I was just going to comment on the rate cuts. If you looked at PepsiCo's and ConAgra's earnings, and if you look at the Fed's prices, average prices for soda and potato chips, I know this sounds weird, but sodas plateaued and chips have dropped, and both companies have cited that they've noticed a slowdown. In a nutshell, if potheads are not buying snacks're over an 80% chance with predictive markets of a rate cut in September, right? So I think that not that the predictive markets have been right yet,

rate cuts, but it does seem like they are likely to come this time. I think that maybe yesterday's numbers finally gave Powell the cover that he will need to do this. But I'm really interested to see how these Ethereum ETFs are going to trade. I mean, Dave Tull, you have to have some thoughts here being that you own the micro strategy of ETF of Ethereum in Canada, right? Yeah. So I don't really have some thoughts around how things are going to go. And I have no particular anticipation. I think, no doubt, though, it's a great opportunity at these prices to go ahead and accumulate. But I do want to give, uh, I, you know, I, I missed a bunch of the conversation in non-terms of, of, uh, you know, current events.

I'd like to go ahead and relay a conversation or a number of conversations I had yesterday, um, with various family offices, um, that really have absolutely no beta exposure to crypto. They're interested in systematic trading of crypto, like they'd be interested in systematic trading of any asset and algorithmic trading, but they have no direct exposure to crypto at all. And it doesn't seem like they have any interest in, you know, even pursuing the concept. I think, you know, their friends that got burned in Celsius Voyager, and to some extent FTX, I think, passed along a very bitter lesson. I think the very large institutions like the pension funds, especially the ones that't publicly lose everything credibility-wise in the crypto frauds, you know, I think they have exposure. They're smart folks. They've been

educated. They've been leveraging off of other people. Some of them have it, you know, directly into crypto. Some of them have it more in kind of a VC, you a VC pocket inside of their allocations. I think those folks have some exposure, but there is, I believe, a huge vacuum from mid-sized institutions all the way down to small family offices that unless they were crypto forward from the very beginning, are really not involved in crypto. I don't think the ETH ETF is going to get them involved in crypto. And I think it's going to take time. I know none of us are patient, but it's going to take time. But when they do get involved, we're all going to know it. They're certainly not there yet. And when they do get involved, I think the prices are going to go crazy because the numbers are just obscene, you know, when it comes to these folks having to allocate. So that's all I have to add on the matter.

Mario. How's it going? I know you're actually here. I saw you go down and up. Can you hear me? I can. I just wanted to make sure we could. We can. How are you?

I'm great. This is a great conversation, actually. For our friends here from Stacks. Yeah, congratulations. Congratulations, Raneeb. We haven't spoken in a long time. It's an interesting circumstance to talk under today. So congrats, man.

All right. Appreciate it, man. Not at all. Let's get into the discussion with our partners, Astroport. I think they're coming up. They haven't come up yet, Scott. So I'm just waiting for them

to come up and have the discussion. I think they're glitching out. It's been happening for the last couple of days. You need to always waiting for them to come up then we can have the discussion i think they're glitching out it's been having happening for the last couple of days you need to always wait for them to come up with a lot of glitches lately but i mean listen to nature it's a lot but i can't remember we used to get rugged like every third spaces at the beginning uh yeah yeah the tap is here and there now it doesn't happen as much as before by the way i'll be uh while waiting for the sponsors to come up. The reason I haven't been able to join those spaces is prepping for the next few days. We'll be interviewing a couple of leaders that are related to one of the wars that's ongoing right now.

So it should be, that should come out. Name names, Mario. I cannot name names. And I'm trying to fill the void waiting for our partner to come up on stage uh but till then i cannot name i've never seen a human being prep like you but in the in the meantime in the meantime i'm russian interviews i've had interviews i'm like three minutes before i'm like who is what who's this world leader and then i just ask him some random questions you're like four days deep in like the wording of your questions.

I saw you doing it with RFK at, at a consensus. It was really astounding. Impressive. Yeah. We should see Lex Friedman, how she prepares. By the way,

while waiting for our partner to come up on stage, our sponsor to come up on stage question out for you is, has your, is your strategy shifting? I know it's in the bear market, but are you starting to get into more OTC deals? Has that changed? Because I know we've discussed it a few times on this space.

I haven't seen many floated, to be honest. So I think that, I mean, right now, like, you know, looking around, what I've seen is I think a lot of sort of, you know, with the pre-sales, obviously, you know, a lot of people for new projects are waiting to launch until market conditions are more favorable. We saw people delaying through the years ago to get to now. Now they're delaying to October. You're doing a mistake. You're doing a mistake. I was going to say on the OTC side, I think that they think they're underselling themselves now. No, no, no, no, no, no, no.

It's not that. That's to an extent, but a lot of them do. They still like capital. So what you're doing is you're waiting for the bulk OTC deals to come in from some of our partners that we both work with, but they're not doing it because a lot of the KOLs don't have the liquidity. So projects that like, let's say they have a million dollar allocation or $2 million allocation to fill as an OTC allocation.

They're struggling to find the KOLs. The KOLs don't have infinite capital. So it's not the supply side. There's a lot of projects that would love to give out tokens at OTC prices and raise some capital and get those backers. Maybe with a bit more, with a longer vesting schedule, considering the lack of liquidity right now. So the supply is still there, but the demand is not there,

so you've got to do it individually. So we're going to projects yeah we're going to be doing it for what's exactly we're scaling the front uh the the individual side so we're talking a lot of projects for some good otc deals so if you are a project um that has a token and want to work with us on the media side and have us invest as well and hit me up and we'll connect you to the team but we're doing those at scale so we're getting aggressive during these times. Luckily, Mario has infinite capital. Not infinite.

Not infinite, my friend. I'm not on the market. What he was saying to all of you is all you poor have run out of money because you didn't manage your fair market. And brilliant rich people like Mario. That's one way of putting it.

The other one is like, we're not really a KOL, so we do write bigger checks and stuff. But we, but yeah, we're not Anabokas sitting at $3.4 billion cash. We're talking about autosuggest. Let's get one of the ones that Scott is involved in and we're not involved in, at least not yet. They kind of backfired on you. And that's Astropod.

So Astropod, first, Donovan, good to have you. Second, the team would love to chat to you. They were actually willing to reach out to you before this space. So when they saw that I'm going to be chatting to you today, they're like, shit, Mario, can you connect us? So, yeah, we'd love to connect offline. But to dig into that conversation, before I say what I like about you guys and why I want to be involved

and can you first tell us you know can I explain pro five-year-old what is astroport what are you guys building or what have you guys built already yeah absolutely yeah thanks for having us I've got jose here as well I see I think he'll be he'll be online soon but essentially uh you know that's report we're building what we're calling Crypto's Permissionless Liquidity Network. It's essentially a permissionless DEX. We want anyone to come and provide liquidity, be passive about it, earn some yield, swap some tokens. You know, we're deployed on five different chains. So we're kind of trying to meet you where you're at there already and really just focusing on making providing liquidity great again and accessible to anyone in the crypto space okay so before digging into

why you've chosen those chains and what makes you different to to other amms let's get into the basics what is a permission list because i only kind of cater to everyone in the audience from people that are not too deep in the space to people that are very technical what is a permissionless? Because I want to kind of cater to everyone in the audience, from people that are not too deep in the space to people that are very technical. What is a permissionless DEX? Yeah. So basically that just means that anyone, if you're on the chain, you can come and provide liquidity. There are no gatekeepers.

There are no minimum requirements. There are no like custodian. We don't keep your money and only allow you to withdraw it some anytime but you like specific times or anything like that you know it's open to everyone if you've got ten dollars you want to come put in you can come and provide that liquidity earn some yield on that you know no gatekeeping free for everyone to use essentially so so I want to explain very briefly to the audience in a simplified way what it means providing liquidity.

So when you go to a centralized exchange, everyone that uses Binance, OKEx, Coinbase, etc., there's an order book. So essentially, someone puts in a buy order, someone puts a sell order, and then the exchange kind of matches the two. And then, but the way, so what we try to do in crypto, we've

done successfully, is kind of decentralize that process because now you've got centralized, you know, you've got to have a decentralized ecosystem with centralized points of failure. One of those, you know, custody is one. Another one is exchanges. And we've solved it through automatic market makers. And for automatic market makers, like getting into the technicalities of how it works,

what it requires is a pool of the token that's being traded and of stables as well to kind of have that match or whatever two tokens are being matched together so whatever the pair is and that liquidity pool requires people to put in whatever token in there let's use a USDT liquidity pool for those to make it simple so people have to put USDT in there and then but there has to be some sort of incentive to stake the tether the state with the eath uh or whatever the cosmos whatever token they have to take there so that incentive is what allows um uh decentralized exchanges to operate now you said you made it permissionless and you

allowed you're kind of stressing on the point that you allow anyone to put in doesn't matter how small the amount of money there is even they if you can stake $10. But is that different to other, is that one of the differentiators from other decentralized exchanges, the other DEXs? Not so much. Most DEXs do this permissionless part of it. But what makes Asport a bit different here is we're very focused on the passive providing of this liquidity. You you're not a professional trader, you might be a protocol with a treasury or anyone like that. And you want to come put some money in and some yield and you don't have to actively manage it to make sure that you're getting those fees. Okay. So you essentially kind of simplify it for the average show yeah yeah okay but then then and

i know you said you brought out your partner on stage as well so he can jump in whenever you like um and that back and forth hey man how are you did you want to add anything you add to the conversation before i ask my next question anything that was missed yeah i'd say yeah yeah for sure i think you gave a good context i said the main thing is you can think of like the first mm was uni swap v2 that some people might be aware of and that was like a very simple kind of dumb formula right there's this like x y equals k which is pretty inefficient it was kind of like a v1 um and then uni swap came out with their next version which was the opposite it was like very advanced and only really professional market makers people that are running bots or whatever could provide liquidity and what Astroport tries to do

is really make passive liquidity, so like what made Uniswap, the original Uniswap so great, as efficient as the active market making. And it's like a very advanced formula which people can read about that kind of makes sure that it's the best for both traders.

So you can have best execution with not too much liquidity required and also the best for LPs because they get rewarded for their impermanent loss. And so like done a lot of backtesting, there's a report that's out now that kind of shows the performance increase of PCL, which is the Astroport pool type over all the others. And that's really the main inefficiency and the main goal is kind of like make passive LPN great again, because that was really one of the biggest innovations of crypto

is letting anyone and everyone be able to provide liquidity on these large centralized market makers. Yeah, so first of all, of course, I didn't know it was you that was on stage. I wasn't looking at my screen. So good to have you. Good to have you guys. I think one of the big badges of honor that Ashford has

is having you guys, I think think incubate them or invest really early so uh congrats on that uh yeah good to have you on stage man so kind of taking a step back um i think the point you've made like the simplification of it is is important for the decentralization of it i think the more complex something becomes it becomes more institutional i think did you did we see that kind of shift towards institutionalization of Uniswap V2? And is that you kind of trying to democratize that by simplifying it for the average Joe? Yeah, for sure. I mean, Uniswap V2.

So, yeah, I mean, Uniswap V3 is really the one that marked this shift to institutionalization. Like you have this concentrated liquidity, which means you can put in any range. So it actually starts looking a lot more like an order book. So what you've seen in every sort of research piece that's been just been released since about Univi3 is that LPs consistently lose money. Like they lose money versus just about anything, like holding the two assets, passive liquidity. And we kind of show the same thing in this report. And so it became much more institutional like you have these this just-in-time liquidity these people with advanced sophisticated bots uh that are coming in and so it became yeah it like became much more centralized and so the the goal of astroport with

pcl is to try and bring back passive liquidity uh and make it make it much more efficient, basically. And one metaphor I sometimes use is what AMMs did to liquidity provision is kind of like what Airbnb did to hotels. First, you had only professionals, like hotel chains, could basically provide accommodation. Only professional market makers, large centralized market makers could provide liquidity. And what AMMs did is they opened it up so that anyone that has spare assets in their wallet that they're just holding can earn some fees by providing them as liquidity similarly to how you know an airbnb

if you have a spare room in your house or whatever you can you can spin it up um you can you can just like uh like add it to airbnb and earn some some extra some extra money from it and like astroport is sort of like the next version of that like trying to professionalize that further and take it into take it to the next level yeah so next i want to focus on is the change that you guys have selected i think cosmos is a big focus of yours and i like the way i see astroport is a kind of one way one way to get exposure to a chain i remember the last one we did that is for in a dex on linear it's like one way to get exposed to the Linear consensus is a blockchain. We'd like to invest in that DEX.

Can't remember their name. So would you say, because you guys are one of the larger DEXs on Cosmos. Is that correct? Yeah. Yeah. I believe we're the second largest. Sorry. Go ahead, Donovan.

Yeah. No, just echoing what you're saying. Yeah. Yeah. And your focus, the change that you guys are focused on you've you've deployed on neutron uh cosmos injective say in terror too which i was surprised we had been keeping up with terror for a long time why those five chains you feel that they've just been uh underappreciated and untapped yeah like uh neutron osmosis inject Injective, Say, and Terra.

After the Terra collapse, we kind of saw the gap to go to Terra 2 again and just kind of start rebuilding everything that we've worked so hard for. So that was a natural progression. And then from there, we saw Injective coming up, and they have an order book, and we have some interest in getting our liquidity to be deployed on order books. So we went to Injective. From there, we saw a lot of good things about Neutron, spoke to the team, really liked what they were doing.

So we deployed to Neutron and we actually moved our governance there. But that's a different discussion. And then when Say got launched as well, saw a lot of interest for everyone to move to Say and go build on Say as well. So we deployed there. So we've got these five chains and we kind of spread out. And if any of these chains are doing well, Astroport does well as well. And one of the things in the report that we saw was that Astro as a token actually outperforms the L1 token that it's deployed on. So it is in a way like this index baked on all of these chains that were deployed on, which has been great to see.

Yeah, that's basically it. I'd say the Astroport is very Cosmos focused, like made that bet initially. I think other than Solana and Ethereum, Cosmos is one of the ecosystems that has like a real reason to exist, which is just this thesis of sovereignty and people wanting to own the ground that they build on. There's a lot of interesting experiments happening on Cosmos

with different app chains taking different approaches. And Astroport's goal is just to be the liquidity layer for all of that. And yeah, I think the report kind of shows it can be an index bet on Cosmos. And you kind of saw that earlier on this year when meme coins took off on Injective, Astroport was generating a bunch of fees off that. When they took off on Say, Astroport was generating a bunch of fees on that. And so it's just like a great way to get sort of beta exposure to the to the

leading cosmos chains i agree that's that's what interested me as well like i'm curious about your tokenomics your token utility as well before digging into the token there's one thing you mentioned donovan earlier um so when you're saying you said you're using liquidity the liquidity in as many places as possible um can you elaborate what you mean by that? Yeah, so basically these algo pools, the PCL pools that concentrate the liquidity automatically, they're really well catered for going to use that liquidity on an order book. Like we've got on-chain order books on Injective and Neutrons one is also coming real soon.

So this pool can automatically go and deploy a piece of that liquidity in the pool on that order book. And by doing that, you're exposing that to more orders. You're getting more fees. Alpys gain more fees from that as well. And everyone's happy. So that's kind of one of the, in a way, magic ingredients of these pools is by being automatic and permissionless, they can go and do this and just kind of use that liquidity in so much more ways than a traditional pool.

Jose, for Delphi to get involved, what was the thing that kind of got you guys, because you guys are very selective about projects you back, what the the aha moment saying oh we're backing these guys yeah i mean we we got involved very early on when when astroport was was launching on on the original terra before before the collapse and kind of saw the vision to do a much better dex there and then since then just been super impressed with the team's resiliency and building through this. And overall, we do think that passive liquidity has a place. It's kind of like, I mean, crypto has kind of migrated very much away from passive liquidity right now. Everything's intense based and solvers, which is kind of like recreating the traditional system, right? You just have like market makers and centralized exchanges that fill these orders off chain.

And we think like Uniswap was one of the most magical moments that I think happened in crypto. And people have kind of abandoned it because like this initial version was flawed, but we think it's possible to improve on it and kind of bring back like passive liquidity. Yeah.

Yeah. And let me dig into, by the way didn't know you guys you guys launched before donovan before the collapse of terra of luna yeah yeah i believe it was december 2021 that was the official launch yeah at the at the peak astroport had like one point like over a billion in tbl oh wow on Terra one it was like um yeah it was a vampire attack on Terra swap which took like 90 of their liquidity and it was the leading decks on Terra one was generating like half a billion in in trading volume a day holy good times what was that day like I know so I'm not this a bit unrelated but what was the day like when Linda collapsed uh it was it was a different kind

of wild like you see these volume numbers and you're like holy shit we're doing two billion in volume today but you know that it's it's a bad two billion you know but uh you know the team was there they were available we made sure everything worked and everyone could could still do what they that what they needed to so yeah i mean most of all the other dexes and stuff went down on the day so for a lot of people astroport was really the only way to get out of of of luna and ust on chain so yeah team was working like 24 hours a day for a few days just just making sure everything stayed up it was some wild times uh your story is a lot wilder than i expected um and tell me more about the token

I think that's kind of the elephant here so you guys launched a token in April alright so it's been a few months now and what's the can you tell me more about the tokenomics and your thoughts on the token as well because your token is sitting at a

FTV of 50 million market cap of 9 million volume is pretty low I think it's just for what you guys are building and who's backing you. The numbers are surprising, which is either there's something there in the tokenomics that I just can't, but probably you can explain it better, or you're just extremely undervalued. Yeah, I mean, maybe I can start. Like the tokenomics are pretty simple in an era of complex, like, you know, valueless governance tokens.

Astroport, pretty much all fees are distributed to stakers. It's been paying out a steady like 10 to 30% yield to stakers all year this year, just off trading fees alone. And then the idea is to launch uh i believe the team has announced launching uh effectively like a vx astro like a modified version of the of the curve wars if you kind of remember that and the idea with that is just that astroport is present on so many layer ones um and like there's always going to be competition for the top trading pairs you know like the the sort of adam stablecoin or the Tia stable coin pairs and like layer ones will have to kind of acquire Astro in order to divert emissions

to their chain and make sure they have like the top, like they win the top trading pairs. So you can think of it like the curve wars, but rather than happening between stable coin issuers, the idea is that it would happen between like the layer ones themselves, which Astroport is deployed on um yeah and then i mean i think valuations like all of defy has is just i mean obviously cosmos itself is it hasn't performed very well all of defy has just gotten crushed um in this this cycle it's like all about the memes right like cash flows aren't sexy they kind of anger you right like it's, right? It's harder to tell hypothetical stories of future value when you have

cash flows. So I think there will be a DeFi repricing at some point. Donovan, I'll let you answer that question as well. Just about the token and more about what you have planned moving forward as a final question. Yeah, absolutely.

So I'll just maybe expand on like the utility of it. So when you stake your Astro for X Astro, and this is an instant stake and unstake, there's no lockup period or anything like that. You start earning the fees from all of these chains that we deployed on. And we'll soon be, as Jose said, we'll soon be launching VX Astro. And VXAstro will be available on all of these chains that we're deployed on. And with that, you get your normal governance power from staking, you get fees from all of these chains we're on. And shortly after VxAstro, we're also launching a bribes-like protocol. So we'll have these L1s competing for liquidity for their pools on their chains

and other teams coming in and bribing VX Astro holders to vote for their pools that also earn VX Astro holders some more earn from those bribes. So it's a really exciting time for the next two months. And then after that order book integrations and things like that expanding more so yeah we're we're very excited about the next two months no appreciate it man and as i said i'd love to to talk offline and i'm a bit jealous that scott is involved with you guys and you guys have delphi digital so uh you know congrats on what you built so far and uh um, for what we're still being here after the, the Luna fiasco. I appreciate being on the show.

And if anyone else that wants to check out Astro Pop and the handle is in the title, the team's going to change the title now. So just click on their profile picture, click on Donovan's profile picture here on stage. Um, otherwise, thanks a lot, everyone for joining us today.

And we'll see you again on Monday. Thanks a lot, everyone. Thanks Jose. Thanks. Thanks guys. Thank you. Cheers.